Indonesia's Economy
Lessons from Indonesia
What Indonesia's experience teaches about resource management, crises, decentralisation and industrial policy, and a recap of the module.
Indonesia offers several lessons.
Lessons
- Invest resource windfalls in education and farming.
- Short-term foreign debt creates crisis risk.
- Decentralisation works where local governance is strong.
- Export bans can attract processing but have costs.
- Fiscal rules build credibility.
Module recap
- Indonesia spans 17,000 islands with 280 million people.
- Suharto’s New Order grew fast with technocrats and cronyism.
- The 1997-98 crisis shrank the economy 13 percent.
- Decentralisation shifted power to districts.
- Indonesia produces over half of world palm oil.
- It’s the largest thermal coal exporter.
- Nickel downstreaming attracted smelters.
- Nusantara is a new capital in Borneo.
- GoTo leads a digital boom.
- Free school meals began in 2025.
- India and Indonesia trade coal and palm oil.
The oil school legacy
Children educated in schools built with 1970s oil money grew into workers who staffed Indonesia's later factories.
Thinking Indonesia's growth is only about commodities
Education, reforms and digital growth matter too.
Key takeaways
- Investing resource windfalls wisely pays off.
- Debt and weak banks create crisis risks.
- Industrial policy has benefits and costs.
- Fiscal discipline builds credibility.
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